ASU finances could improve due to Starbucks partnership

Arizona State University's partnership with Starbucks to provide financial help to the company employees should enhance the school's finances, reputation and online programs, according to a report.

In this file photo, Starbucks barista Linsey Pringle prepares a cup of coffee at a Starbucks Corp. store in Seattle. Starbucks on Monday announced a new partnership with Arizona State University to make online degrees available to its 135,000 U.S. employees who work at least 20 hours a week.(Photo: Ted S. Warren/The Arizona Republic)

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Arizona State University's partnership with Starbucks to provide financial assistance to company employees should enhance the school's financial situation, according to a report.

Moody's, a credit-rating agency, feels ASU has the ability to boost revenue beyond what it offers in financial assistance to Starbucks employees, adding that the program also could enhance ASU's brand.

In a separate report, another credit-rating agency reduced its grade for the University of Arizona by a notch, citing reduced state financial support and a considerable amount of planned debt issuance.

Arizona State University's partnership to help Starbucks employees complete their degrees online will improve the school's financial position, according to a report from a credit-rating agency. Another agency, meanwhile, lowered its grade for debt issued by the University of Arizona.

ASU's deal, announced this week, will help bolster enrollment, add tuition revenue, expand the online program and boost the school's brand recognition outside the state, according to a commentary by Moody's Investors Service. The program will help Starbucks employees who work 20 or more hours a week complete their degrees online.

"We expect that for ASU the cost of offering financial aid will be outweighed by net tuition revenue growth through the potentially substantial new enrollment that the program brings to ASU," Moody's said in the commentary.

ASU has a high Aa3 credit rating. About 43 percent of freshmen come from other states and 13 percent of ASU students are pursuing online degrees. The Seattle-based coffeehouse chain has 135,000 workers across the U.S.

ASU will offer financial aid to students, but the university still has the potential to grow its tuition revenue, according to the Moody's report. ASU is offering scholarships worth $2,420 per semester for juniors and seniors and $1,267 for underclassmen, Moody's added.

Standard & Poor's, a separate credit-rating agency, this week slightly lowered its rating for University of Arizona bonds to AA- from AA. Also, a type of debt known as certificates of participation were dropped to A+ from AA-.

"We understand that operations have been hurt by a considerable decline in state funding," said S&P credit analyst Carlotta Mills, in a report that also cited a considerable amount of planned debt issuance ahead for the University of Arizona.

Moody's, which uses a slightly different grading system, affimed its Aa2 rating on $1.2 billion worth of University of Arizona debt, with a negative outlook. The company said the university has healthy student demand, strong tuition growth, revenue from diverse sources including gifts and other favorable factors.

But it cited a potential drag from University Medical Center, a teaching hospital. "The hospital's "weaker performance could impact the university over time through reduced financial transfers" or impair its ability to attract top faculty and researchers, Moody's said.

The Moody's grade of Aa2 for the University of Arizona is slightly above its Aa3 rating for ASU.